NEWS WRAP

Coronavirus threatens Capitol Hill

• COVID-19 has hit Capitol Hill, with seven members of Congress placing themselves in self-quarantine. The lawmakers who have taken the precautions include five Republicans and two Democrats; Texas Senator Ted Cruz and Arizona Rep. Paul Gosar both made the announcement of their quarantines after coming into contact with the same infected person at a conservative political conference. North Carolina Rep. Mark Meadows, President Trump's incoming chief of staff, also opted to undergo a 14-day isolation period after attending the same conference. READ MORE HERE
   

• Senator Elizabeth Warren, the final female candidate vying for the Democratic nomination, dropped out of the Democratic race for president. Her withdrawal has marked the end of this cycle's bid for a female president after a field that initially had an unprecedented number of women running. Non-Resident Fellow Kim Hoggard discussed the difficulty women have faced during US presidential elections as they've tried to "break the White House's glass ceiling" and says we could still see a female running mate chosen for office of Vice President in the November election. READ MORE HERE
   

• Senators Kamala Harris and Cory Booker have joined the growing list of high-profile supporters to endorse Joe Biden’s campaign for the White House. The support comes off the back of Biden's wave of success in the South Carolina primary and in the Super Tuesday’s polls, where he won 10 of the 14 states at play. In a statement on Twitter, Harris said she would “do everything in my power” to ensure Joe Biden becomes the next president. READ MORE HERE
   

• A deepfake video of Joe Biden retweeted by President Donald Trump has been the first such video to be labelled by Twitter as 'manipulated media'. The edited footage makes it look as though Biden backed Trump's re-election and was first tweeted by the president's social media director, Dan Scavino. Under a new policy targeting deceptively edited content, Twitter labelled the clip 'manipulated media', but only after the clip had been live for close to 24 hours. Scavino continues to deny the clip was manipulated. Though Facebook has refused to ban the video it has taken similar action and put a 'partly false information' notice on it. READ MORE HERE

ANALYSIS

Financial markets are sending dire signals, Australian policymakers need to listen

Dr Stephen Kirchner
Program Director, Trade and Investment

US and global financial markets have been sending signals for a long-time now that all is not well in the world economy. The trade war has taken a toll, not only on global trade volumes, but also industrial production and business investment due to increased uncertainty. The US Federal Reserve began cutting interest rates in August last year, while the Reserve Bank of Australia resumed its easing cycle in June after nearly three years of policy inaction.

The COVID-19 outbreak has delivered a new shock to the global economy that has shut down much of China’s economy and increasingly other economies as well. While some have suggested this is a supply or real shock, the dramatic fall in the oil price and inflation expectations is telling us that the associated demand shock is going to be much more significant. The entire US yield curve now sits below the US Federal funds rate and the Fed is expected to ease again later this month.

In Australia, this shock comes on top of the bushfires at the beginning of the year and the expectation that the Australian economy will likely contract in the first quarter. While policymakers can’t do much about the COVID-19 shock to supply, they can and should address the shock to demand.

Unfortunately, the Reserve Bank has left Australia inadequately positioned to weather a global downturn. As I argued in the Australian Financial Review last month, the RBA has been dragging the chain on monetary policy, distracted by medium-term financial stability concerns that have led it to neglect its price stability and full employment mandates. As I wrote in May last year, ‘this approach itself carries financial stability risks. It gives the economy a much weaker starting point should a negative shock actually occur.’ That shock is now here.

The federal government is looking to implement a circa A$10 billion spending and tax package to support the economy. Measures designed to directly address the incipient pandemic and its immediate consequences are obviously needed. As the downturn deepens, the federal budget balance will deteriorate, even in the absence of additional policy decisions by government. The government no longer has a choice about whether the budget stays in surplus.

However, as the US experience with the global financial crisis demonstrated, there is no substitute for decisive action by monetary policy. As I argued in my USSC report on the lessons from the US experience with quantitative easing, low interest rates are not a constraint on the effectiveness of monetary policy. Unlike fiscal policy, monetary policy is quickly and infinitely scalable. It is relatively costless to implement and can be unwound quickly when no longer needed. By contrast, fiscal policy is a slow and leaky bucket.

When central banks ask for help from fiscal policy, it is a sign they have not done their job properly. As the US economist Scott Sumner says, ‘estimates of [positive] fiscal multipliers become little more than forecasts of central bank incompetence'.

Coronavirus, a trade war and strategic competition

A more robust approach to China is one of the few areas of bipartisanship in a highly polarised Washington, DC.

• Is China likely to remain bipartisan during and after the 2020 election?
• How is the Trump administration approaching strategic competition with China?
• What is the “inside the beltway” view of Beijing?

To understand where US China policy might be heading, please join the US Studies Centre for a conversation with Bethany Allen-Ebrahimian, the China reporter for Axios.

Bethany Allen-Ebrahimian covers Beijing's influence and intentions and writes the weekly China newsletter at Axios. Based in Washington, DC, she was also the lead writer of the International Consortium of Investigative Journalists' report known as the "China Cables", which detailed classified Chinese government documents revealing the inner workings of China’s detention camps in Xinjiang.

DATE & TIME
19 March 2020
6.00pm–7.30pm

LOCATION
Level 5 Function Room
Administration Building (F23)
City Road corner Eastern Ave
University of Sydney, NSW 2006

COST
$10 General Admission
 

VIDEO

Elizabeth Warren's SNL sketch after dropping out of Democratic race

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